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September 10, 1998 Press Contact: William Harms
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Scholars address usefulness of poverty rate for evaluating welfare reform

Researchers with the Northwestern/University of Chicago Joint Center for Poverty Research discuss how changes in social policies affect the interpretation of the poverty rate

Official poverty rate data to be released later this month are likely to tell an incomplete story about economic disadvantage in the United States, according to experts associated with the Northwestern University/University of Chicago Joint Center for Poverty Research.

The data to be released by the U.S. Census Bureau will report figures that reflect recent changes in the official poverty rate including Temporary Assistance to Needy Families (TANF), which imposes time limits and work requirements, and the Personal Responsibility and Work Act (PRWORA).

“TANF represents a large policy shift that will effect the relationship between measured poverty and families’ economic well being,” said Susan Mayer, Director of the Joint Center for Poverty Research and an Associate Professor at the Harris Graduate School of Public Policy Studies at the University of Chicago. “As a result, the official poverty rate is not a good measure of the success or failure of the new welfare policies.”

Speaking today to a briefing of more than 100 policymakers, Mayer and other scholars noted that whatever the impact of the welfare reform bill of 1996, it will not be revealed by the official poverty rate since that rate focuses exclusively on pre-tax money income while much of the initiatives from TANF affect family’s time, post-tax income and in-kind transfers.

According to Mayer, the Census Bureau figures will not reflect the amount of time –or income– lost to family related activities such as child care, cooking, cleaning, and home maintenance due to new state welfare programs that require work in the labor market. Thus, income may increase for some people (who will no longer be counted as poor), but their material well being will be reduced because of this legislation.

“The temptation is to think that if the poverty rate declines, they [welfare recipients] are better off and we should congratulate ourselves; and if it goes up, we should be ashamed of ourselves,” Mayer said. That perspective ignores the other outcomes of welfare reform.

Robert Michael, the Eliakim Hastings Moore Distinguished Service Professor and Dean of the Harris School, said that there may be too much focus placed on the official poverty measure. He explained that many factors such as availability of health insurance have an impact on a family’s well being. The current poverty rate is misleading because it measures only pre-tax money income, and excludes assistance such as food stamps, child care subsidies, and the earned income tax credit, said Michael, the 1995 chair of the National Academy of Sciences/National Research Council (NAS/NRC) Panel on Poverty and Family Assistance.

Christopher Jencks, the Malcolm Wiener Professor of Social Policy at the Kennedy School of Government at Harvard University, said that the official poverty rate is not a good measure of economic disadvantage for comparing welfare recipients to working mothers. Wage earners, unlike welfare recipients for instance, may not have medical insurance coverage and must pay for childcare. He cited a recent study that illustrated that even a 40 percent increase in income above the level received by welfare recipients did not raise significantly a family’s economic well being.

Established in 1996, the Joint Center for Poverty Research seeks to advance the understanding of the causes and consequences of poverty and identify the effect of policies designed to reduce poverty. The U.S. Department of Health and Human Services provides major funding for the Joint Center for Poverty Research. The Center is affiliated with the Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago and with the Institute for Policy Research at Northwestern University.

The Northwestern University/University of Chicago Joint Center for Poverty Research
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